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Sunday, April 24, 2011

Dennis Calabrese and Mike Papantonio debate the FairTax

In this video aired on Fox Business, Dennis Calabrese and Mike Papantonio debate the FairTax bills that have been introduced in Congress. The FairTax bills (H.R. 25 and S.B. 13) propose a national sales tax on new goods and services to replace the current personal and corporate income tax. Businesses large and small would be exempt from paying the FairTax if the purchase is for business purposes. As part of the FairTax, all households would get a prebate (a rebate paid in advance) every month for sales tax paid for purchases up to the poverty level for that size of household. The FairTax bill also calls for the repeal of the16th Amendment, the constitutional amendment that authorized the federal income tax.

Dennis argued for the FairTax and Mike argued against it. Mike used an example of a person making $15,000 per year who wants to buy a car and that the tax on the car purchase would eat up that person’s buying power. Dennis counterargued that the FairTax eliminates the corporate income tax that gets passed on to its customers. As a result, car manufacturers and dealers would be able to pass that savings on to their customers in the form of lower sticker prices.

I agree with Dennis’s counter argument and have an additional counter argument of my own that I would like to share. In reality, most people who make that small amount of income buy used vehicles for transportation, because that is all they could afford. Since purchases of used goods are exempt from the FairTax, that person would not have to pay any FairTax if the car purchased was a used car.

I believe that the current personal income tax and corporate income tax systems has hurt and continues to hurt the economy in the United States. It discourages productivity by taxing the income progressively. It encourages borrowing and spending and by granting deductions for purchases, contributing to the current credit crisis. It encourages corporations to keep their profits on overseas operations out of the United States to avoid taxation on those profits instead of bringing profits back to the United States where it could be used to create jobs in the United States. Finally, it requires a lot of resources to administer and enforce.

I favor the FairTax because it encourages productivity and discourages spending, allowing more Americans to save money. The FairTax eliminates the corporate income tax, encouraging corporations to locate their operations into the United States and create jobs. The FairTax also requires a lot less resources to administer and enforce since only businesses would be required to file tax returns.

Please let your Representative and Senator know that you support the FairTax bills.